Counterpoint: Priced out of America

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This “Made in the USA” issue of Home Channel News profiles several companies that point to the benefits of domestic manufacturing. But for many more companies, sourcing product to low-cost overseas factories makes compelling economic sense. Home Channel News interviewed an executive from one such company — a manufacturer of a well-known brand of home improvement products — who spoke openly on condition of anonymity. Call him “Manufacturer X.”

Home Channel News: Your company is looking to manufacture more of its product in China. Why?

Manufacturer X: The big issue is cost. Our retailer customers are not allowing us to increase prices. And even if they did, they wouldn’t allow us enough to substantiate the margins we would need to survive. By going overseas and taking advantage of the lower cost structure, we are able to survive and compete.

HCN: Was it a difficult decision to bring manufacturing out of the United States and into China?

Manufacturer X: We watched a major portion of our business slip away, and that volume has hurt us dramatically — both in dollars and loss of employment. We’d love to remain a domestic manufacturer for all of our products, but due to demands of the marketplace, we’ve been forced to do it.

HCN: Describe the cost savings that you see overseas.

Manufacturer X: Let me put it this way: We have a machine here in the U.S. We load it up and it runs, turning materials from one end into packaged products at the other end. We move the product into the warehouse with a forklift. It’s all automatic, and still it’s 30% more expensive than manufacturing in China, where the same product is made by people. And that includes paying the freight, duty and cost fees. That’s just an example of the tremendous cost savings available to Chinese-made products.

HCN: What about the logistical benefits of domestic manufacturing? Are they meaningful?

Manufacturer X: Yes, they are. For instance, what if you’re forecasting 10,000 pieces, and all of a sudden the market demand is 20,000? If you’re buying from China, you’re not going to be able to get that extra 10,000. In the States, I can ramp up production quickly. In China, it’s 90 days from order to shipping.

HCN: Americans think U.S. products are better. Are they right?

Manufacturer X: That is accurate. I believe American-made products are significantly better than Chinese and other foreign suppliers. The quality of the goods from overseas is just not the same as the quality of goods in the U.S.

HCN: Can’t overseas factories be managed with the same high-quality standards and specifications as in the United States?

Manufacturer X: Yes, they can be set, but it’s an awful lot of work. And it’s part of what we have to specify when we go overseas. We have to specify every tolerance. It takes a lot of work and a lot of engineering work to get to that same quality standard as you’d find in the U.S.

HCN: How would you describe the consumer and DIYer — to what degree do they want Made in the USA products?

Manufacturer X: Generally, the consumer says they want Made in the USA goods, but when placed in a purchase situation, they tend to buy the cheapest goods available. But there seem to be more people asking for Made in the USA, and their voices are growing louder. The problem is, the majority of the volume of the marketplace is purchasing based on cost of goods. And the lowest cost of goods has moved overseas.

HCN: Is there a happy ending for domestic manufacturing?

Manufacturer X: The happy ending is that not all U.S. manufacturing will go overseas. There are specific markets and specific manufacturing processes that will continue to be done in the U.S. But they’re not going to be the large-volume, the large-scale processes that we have known in the past. They are niche small markets that have specified needs that a U.S. manufacturer at this point is the only one that can provide.